Geo Energy diversifies into high-value coking coal with new Indonesia mine stake
The deal is for a 50.6% stake in Mutiara Hitam Sukses, which owns mine operator Harfa Taruna Mandiri
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[SINGAPORE] Geo Energy Resources on Wednesday (Apr 1) said it has signed a binding term sheet to acquire a majority stake in an Indonesian coking coal concession holder.
The proposed deal is for a 50.6 per cent stake in Mutiara Hitam Sukses (MHS), which wholly owns Harfa Taruna Mandiri (HTM).
HTM operates a 3,293 hectare mining concession in Central Kalimantan, featuring “2P” reserves – the industry standard for proven and probable commercially viable coal – estimated at 20 to 25 million tonnes.
Geo Energy also said it has secured a first right of refusal to purchase the remaining shares of MHS should the existing shareholders decide to divest.
Geo Energy group executive chairman and chief executive officer Charles Melati said the entry into the premium coking coal market builds upon the group’s recent strategic expansions, which include developing road and jetty infrastructure and acquiring a marine logistics business.
He added that the move positions Geo Energy to capitalise on global steel industry demand and advances its goal of becoming a billion-dollar integrated energy group.
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Strategic pivot
The company described the acquisition as a strategic shift that diversifies its revenue stream from its existing thermal coal portfolio into the hard coking coal market.
Hard coking coal, with a limited global supply and being an essential material in modern steel production, consistently commands a price premium over ordinary thermal coal, said Geo Energy.
The company added that the deal is value-accretive with minimal upfront commitment.
Based on recent market prices, the company expects HTM’s coking coal to achieve selling prices of about US$220 to US$250 per tonne.
Assuming an estimated cash cost of US$110 per tonne and an annual production of two million tonnes, Geo Energy projected that the target company could generate potential annual cash profits ranging from US$220 million to US$280 million for the group.
The coal miner also highlighted that HTM’s underground mine offers a more environmentally sustainable approach by avoiding large open-pit operations.
This method, along with minimal backfilling and land reclamation requirements, avoids continuous land acquisition and significantly reduces capital expenditure, said Geo Energy.
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